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International Fund

October 2019 - Monthly REPORT

The continued rise of equity market valuations

SUMMARY

PORTFOLIO

Top Holdings (alphabetically)

Alibaba Group China Consumer Discretionary Aon United States Financials Charter Communications Inc United States Communication Services Cigna Corp United States Health Care CME Group United States Financials Deutsche Boerse Germany Financials KAR Auction Services United States Industrials Mowi ASA Norway Consumer Staples Newmont Mining (USD) United States Materials UnitedHealth Group Inc United States Health Care

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 31 Oct 20191
1 Month1 Year3 Years P.A.SINCE INCEPTION
Fund 0.8%13.9%14.4%9.6%
Benchmark 0.6%15.8%15.1%10.4%
1 Month1 Year3 Years P.A.SINCE INCEPTION
Fund
0.8%
13.9%
14.4%
9.6%
Benchmark
0.6%
15.8%
15.1%
10.4%

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Equity markets have continued to perform well. We’re not really entirely surprised by this. Companies, although not as cheap as what they used to be, are still trading at valuations that make sense to us, relative to what the bond market is trading at.

We are still getting a decent free cash flow yield out of our businesses which are high quality businesses and, most importantly, are growing.
This means as an investor you’re buying, on aggregate, a portfolio of companies that are at 5% free cash flow yield. For every $100 that we invest, we get $5 back every single year, and that $5 is growing over time.

These are really high quality businesses. The majority of our businesses are companies that are dominant in what they do.
So, whether it’s a salmon fishing business out of Norway, they are the leading salmon fishing business in the world. If it’s a cork producer out of Portugal, they are the leading cork producer in the world. Then we can go all the way to a medical device company like Medtronic, this is a leading medical device company in the world.

What we’ve done is we’ve combined 40 of these companies from all across the world, that are leaders in what they do, and they provide us with 5% free cash flow yield growing 5% – 15% a year.

But let’s look deeper into what’s happening in the markets.

Many people are afraid that markets have gone up too far, and rightfully so. If we look at the S&P 500, it’s posting all-time highs every single day of the week. We would agree the US market as a whole, historically speaking, is actually at a very high valuation. But we have to dig deeper than that, and we have to look at what’s brought this market to that level.

It’s essentially a limited number of companies, 10, 15, 20 companies. These are very large companies like Microsoft, Apple, Google, Facebook, Visa and MasterCard, that have done extremely well over the last 3 – 5 years, and they are the reason why the US markets have done so well over that period.
What we think will happen going forward is that investors will look elsewhere. The markets in the US will not be driven solely by these select group of businesses, but money will flow into the companies that have been somewhat neglected. Where these businesses lie are potentially in Europe, Emerging Markets, and Japan.

What we’ve done over the last year is position the portfolio in a way to benefit from this trend that we believe will come over the next 3 – 5 years.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
9.04%
NUMBER OF STOCKS
37
BETA4
0.78

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 1.2964
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $25,000
  • FUM AT MONTH END A$ 92.74m
  • STRATEGY INCEPTION DATE 1 July 2015
  • BenchmarkMSCI All Country World Total Return Index in AUD

Fund Managers

Description

The Pengana International Fund invests in 30-50 companies across developed and developing markets, large and small companies. The Fund predominantly invests in franchises that deliver stable yet growing free cash flow throughout cycles (which we classify as ‘Core’ holdings) whilst also taking positions in more cyclical companies (‘Cyclical’) and those whose valuation has been materially misconstrued by the market (‘Opportunistic’).

EXPLORE OUR FUNDS

Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Fund
Axiom International Fund
Axiom International Fund (Hedged)
Axiom International Fund (Hedged)
Australian Equities Fund
Australian Equities Fund
High Conviction Property Securities Fund
High Conviction Property Securities Fund
Global Small Companies Fund
Global Small Companies Fund
WHEB Sustainable Impact Fund
WHEB Sustainable Impact Fund
Emerging Companies Fund
Emerging Companies Fund
High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
Pengana International Equities Limited (ASX: PIA)
Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
Alpha Israel Fund
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

1. Net performance figures are shown after all fees and expenses and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 1st July 2015.
3. Annualised standard deviation since inception.
4. Relative to MSCI All Country World Total Return Index in AUD
* For further information regarding fees please see the PDS available on our website.